Latest Articles

What is High Octane Gasoline?

High octane gasoline, often associated with high-performance vehicles and racing, plays a crucial role in optimizing engine performance and efficiency. This article delves into...
HomeLatestJulius Baer Highlights Central Banks' Shift from US Bonds to Gold, Impacting...
Advertisements

Julius Baer Highlights Central Banks’ Shift from US Bonds to Gold, Impacting Price Trends

The notable resurgence in gold prices finds support from central banks increasingly diversifying their portfolios away from US Treasury securities and towards gold, according to insights shared by Swiss institution Julius Baer in a recent market note. Despite this shift, Julius Baer anticipates that while prices are poised to remain at elevated levels, further significant increases are unlikely. Gold prices continued their upward trajectory on Wednesday, May 15th, with futures climbing by 1.36% to reach $2,392.05 per ounce.

Advertisements

Carsten Menke, Head of Julius Baer’s Next-Generation Research, attributes the record recovery of gold not to a sudden surge in demand but rather to an uptick in buyers’ willingness to pay, accompanied by speculative activity.

Advertisements

Menke assesses that monetary authorities, particularly the People’s Bank of China, exhibit a greater inclination to invest in gold compared to Western investors. These motivations are perceived to be more politically driven than purely economic. However, Menke notes that this shift in investment strategy is not as widespread as commonly believed.

Advertisements

Julius Baer suggests that the Chinese central bank’s reduction of its exposure to American Treasury bonds reflects a strategic move aimed at decreasing reliance on the dollar and minimizing vulnerability to potential sanctions. Consequently, while central bank purchases are expected to sustain gold prices at structurally high levels, they may not necessarily propel them significantly higher, as per the analysis provided by the expert.

While Julius Baer acknowledges more downside risks than upside potential in the medium and long term for gold prices, it underscores the essential role of the commodity as a hedge against economic and systemic risks in financial markets.

Advertisements
Advertisements